Italy Economy Real Time Data Charts

Edward Hugh is only able to update this blog from time to time, but he does run a lively Twitter account with plenty of Italy related comment. He also maintains a collection of constantly updated Italy economy charts together with short text updates on a Storify dedicated page Italy - Lost in Stagnation?

Thursday, April 09, 2009

Italian Industrial Output Continues To Decline In February

Industrial production in Italy fell for the eighth month in February as the nation’s worst recession in more than 30 years forced companies to cut output. Production in the euro region's third biggest economy dropped a seasonally adjusted 3.5 percent from January, when it fell a revised 1.2 percent. From a year earlier, working day adjusted production fell 21 percent. The monthly decline was more than the 1.5 percent median forecast of 18 economists surveyed by Bloomberg.

And the picture doesn't seem to have improved any in March, since manufacturing activity fell in Italy at its fastest pace on record, with the manufacturing purchasing managers index falling to a record low of 34.6, down from February's 35.0 and suggesting an unprecedented contraction in activity for the sector. Weakness was widespread, Markit said in their report. Staffing levels were cut at a record pace as firms were forced to adapt to falling workloads and declining new orders. Backlogs of work also declined at their sharpest pace in the history of the PMI as falling demand meant firms to were increasingly able to complete outstanding projects.

The Contraction In Italian Services Continues

Italian service sector activity also stayed close to record lows in March, with employment falling the fastest in over 11 years, according to the PMI survey released last Friday. The Markit/ADACI Purchasing Managers' Index, spanning companies from hotels to insurance brokers, edged up to 39.1 after hitting 37.9 in February, its lowest level since the survey began in January 1998.

The headline measure has not been above the 50 mark that separates growth from contraction since November 2007, and the survey showed jobs were shed in March at a record pace. The survey also showed that companies' input costs and the prices they charged customers were falling at the fastest rate since the series began as firms scrambled to offer discounts to attract business.

"Averaged over the quarter, service sector activity fell at the fastest pace since at least 1998," said Andrew Self, economist at Markit Economics. "The slump is in line with a year-on-year contraction of gross domestic product between 2.5 and 3.0 percent. This implies economic output will contract at a sharper pace in the first quarter, on a quarterly basis, than in the last quarter of 2008."

The Organisation for Economic Cooperation and Development forecast last week that Italy's GDP would plunge 4.3 percent this year and fall 0.4 percent in 2010, giving Italy three consecutive years of economic contraction. According to the OECD unemployment will jump to 9.2 percent after rising in 2008 for the first time in a decade to 6.8 percent.


Alex Roe said...

Interesting - but not a pretty picture, nor is the OECD Economic Outlook report on Italy.

Still, Italy's managers are the best in the world, even if they say so themselves.

I'd be very interested to hear your opinion on this claim which appeared on the 23 April on the Corriere della Sera (in Italian) site:

Your observations are eagerly awaited!

Many thanks,

Alex Roe

Edward Hugh said...

Hello Alex,

"I'd be very interested to hear your opinion on this claim which appeared on the 23 April on the Corriere della Sera (in Italian) site"

Sorry, this is way, way beyond my expertise. I am a macro economist, and I analyse patterns in certain kinds of data. I would neither pretend nor presume to be in any way qualified to amake judgements about who is a better manager than who.

Alex Roe said...

Hi Edward,

Thanks for the prompt reply.

I accept what you say with you being a macro economist.

However, seeing as governments and businesses use macro econimic factors as a basis upon which to develop strategy, poor economic performance at the macroeconomic level would appear to indicate poor strategic decisions, and thus, far from perfect management. Or am I wrong on this.

I am certainly prepared to bow to your expertise in this matter.

Kind regards,


Edward Hugh said...

Hello again,

"However, seeing as governments and businesses use macro econimic factors as a basis upon which to develop strategy, poor economic performance at the macroeconomic level would appear to indicate poor strategic decisions"

Well you mention two different things here, strategic decisions by government, and those by business. In the former case I have no doubt, Italy suffers from poor quality government. But business management is another issue. It could be, for example, that a lot of very able people, seeing the lamentable state of the Italian political process are attracted into business, and I do not doubt Italy has some excellent companies and some excellent business managers. Whether they are any better than those excellent business managers to be found elsewhere I do not know, nor am I competent to judge.

Italy must also, like other countries, have some very poor managers, and again, I don't feel fit to judge the relative proportions between the two.

Macro economics is about aggregate demand, and this is influenced by factors like demographic processes and institutional quality, by internal consumer demand (and saving) and by export competitiveness.

Since Italy's business managers do not set the environment in which they work (eg the labour market or taxation conditions) it is really hard for me to assess just how responsible the managers are for the poor economic performance.

Obviously every country tries to be proud of something, but don't forget, just becuase the Italian economy is doing poorly on aggregate, this does not mean there are not some excellent, profitable and well managed companies.

My own view is that Italy needs a major overhaul of its political system, and a major shift in its demographic dynamic, although I am not very optimistic we will see either of these. In which case, like Venice, Italy will simply sink into the sea.

Sorry I can't be more helpful.


Alex Roe said...

On the contrary, Edward, you have been very helpful!

As you say, Italy does have some very strong companies- and strong companies have good managers, even if many of Italy's businesses are more suited to better times. Economic downturns do not favour luxury goods.

Ah, the crux of the matter! With regard to Italy's political system - it is a mess, and a mess it is likely to remain. Too many people are getting fat on the mess to want to change things, I fear.

I liked the analogy to Venice!

Best regards,